Parag Milk Foods to raise Rs 500 crore via private equity funds

Parag Milk Foods, a Mumbai-based integrated private dairy, is planning to raise anywhere between Rs 400 crore and Rs 500 crore from private equity firms to expand its operations over the next three years, according to its chairman Devendra Shah.

“The plans are in the initial stage. We intend to raise the funds through the private equity route,” he said on Monday, while not ruling out the possibility of tapping the capital market via an initial public offering (IPO).

Parag Milk, founded in 1992, had raised Rs 75 crore from Motilal Oswal Private Equity in 2008, which made an exit from part of the Rs 150-crore raised from IDFC Alternatives in 2012. The company had raised Rs 90 crore from IFC in 2013.

Shah said the proceeds from the proposed fund-raising would be deployed to expand the company's installed handling capacity to three million litre per day,  and set up a third plant in the northeastern region over the next three years.

The company currently has two plants – one at Manchar in Pune district with a handling capacity of 1.2 million litre per day, and the other at Palamner in Chittoor district of Andhra Pradesh with a capacity of 800,000 litre per day, which will be beefed up to 1.5 million litre per day in the next one-and-a-half-year.

Launching the company’s Gowardhan Fresh and Tea Star Milk products in Telangana, Shah said Andhra Pradesh and Telangana were the third-largest milk producing states with a year-on-year growth of 10 per cent exceeding the national average.

Shah said the urban milk market in India stood at Rs 80,000 crore, of which the packaged milk segment accounted for Rs 45,000 crore. Hyderabad alone consumes 2.4 million litres valued at Rs 3,500 crore, and new demand for 200,000 litre is being generated every year from the common capital, he added.

“We have identified Andhra Pradesh and Telangana as key markets. We are looking at expanding to Warangal, Nizamabad and Karimnagar in six to nine months from now, besides setting up 100 exclusive retail outlets in Hyderabad in the next two years,” he said, adding the company was targeting a turnover of Rs 200 crore from the two Telugu states this year.

Parag Milk Foods has earmarked Rs 5 crore for marketing initiatives including television commercials, instore branding and merchandising in Telangana this year.

Stating that Parag Milk achieved a turnover of Rs 1,400 crore in 2014-15, with exports accounting for 20 per cent of this, Shah said the company was expecting its revenues to touch Rs 2,100 crore this financial year through value-added products and leadership in the cheese segment.